General Question

Can I claim my home office on my taxes?

I work from home as an independent contractor for a small-ish business. At the end of the year I receive a 1099 rather than a W-2. I also own and manage a small retail rental property that I have to carry a business license for. Is that enough for me to deduct my home office and the expenses related to it from my taxes? (I already write off expenses for the rental property, but have never claimed the home office.)

9 Answers

I am not an accountant, however:

Your business expenses as an independent contractor are generally deductible on a 1040 Schedule C—and the instructions for that specifically call out how to calculate how much you can deduct for a home office. Some of your operating expenses are deductible, but some need to be spread over several years (e.g., a new computer or other “durable goods”).

If your total expenses are under $1000 I believe there’s a Sched C-EZ which involves a lot less calculating. When I was an independent contractor, I generally was filing that one.

Yes and word on the street is doing so put’s your return in the category of returns more likely to be scrutinized by the IRS because the potential for abuse of this deduction is large and they know it. So make sure your deduction follows their very strict guidelines and the rest of your return is squeeky clean.

I’ve heard the same as Cruiser about this making your return more likely to receive additional scrutiny. I have no idea if it’s true or not.

I wanted to add that the wording of the instructions for the deduction is very clear (from what I remember) that the space must be used exclusively as an office. So you can’t claim your bedroom, your storage room that also has your computer in it, or any shared space as a qualifying “home office”. It has to be it’s own space, and it can’t be dual purpose. I think this is why the deduction may raise additional flags.

When I operated a shoestring business plus rental properties out of my home (in addition to my salaried job) I never met the criteria for “home office” ... nor did I particularly care. The deduction wouldn’t have been worth the record-keeping hassle or the added visibility of the return and likelihood of audit.

I would never say that anyone should cheat on a tax return. However, you should “aggressively” claim deductions against the rental properties.

In order to claim your home office, it has to be a room that is not used for any other purpose. If you use the room for other purposes, you will have to carefully document the times your are using it for business purposes, and then take the percentage of the value of your house, divide it by the hours you use the room for business and take that as your deduction. In case you are audited, you must provide proof of the hours you have deducted.